Shenzhen, a technology hub in southern China, issued an official warning against investment traps hiding under the guise of illegal financial activities, amid the rising interest in stablecoins in the cryptocurrency market. The warning from the city’s Special Task Force on Preventing and Combating Illegal Financial Activities highlighted that projects utilizing attractive phrases like “financial innovation” and “cryptocurrency” are actually facilitating crimes such as fraud, gambling, pyramid schemes, and money laundering. Authorities pointed out that the public’s limited knowledge of stablecoins is being exploited to gather funds through misleading promotions.
Scammers Exploit Stablecoin Popularity for Financial Fraud
The warning emphasized the so-called altcoin projects marketed with promises of stable value, featuring slogans of high returns and low risk, even attempting to build trust through fake global licenses. The official notice advised against transferring funds without meticulously examining project documents and verifying the legal compliance certificates of the investment platforms.
Shenzhen authorities reminded victims of unchecked transactions that they could face charges of collective funding, gambling, or money laundering under the Chinese Penal Code. They stressed that losses are often irrecoverable and urged citizens to transact solely through approved financial institutions.
Regional Regulatory Measures in Action
This warning followed statements by People’s Bank of China Governor Pan Gongsheng recognizing stablecoins’ impact on transforming global payment infrastructure. With Hong Kong taking the lead in regional regulation by mandating licenses for stablecoin issuers in a law enacted in May, the U.S. Senate introduced the GENIUS Act to the House last month.
In a local press interview, Hong Kong’s Secretary for Financial Services and the Treasury, Christopher Hui, announced plans to issue a limited number of stablecoin licenses this year, ensuring a controlled process. Shenzhen’s notice aims to inform the public and prevent potential victimization, as cryptocurrency transactions remain illegal on the Chinese mainland.
